^*Hamid Faruqee is assistant to the director of the IMF Research Department. Jaewoo Lee is deputy division chief of the Open-Economy Macroeconomics Division of the IMF Research Department. The authors appreciate comments by Menzie Chinn, Pierre-Olivier Gourinchas, Hiro Ito, Kwanho Shin, and participants in the 2006 AEA meeting, the Bank of Korea, and the May 2008 conference in the University of Wisconsin, Current Account Sustainability in Major Advanced Economies II. Liudmyla Hvozdyk provided very helpful research assistance.

Abstract

This paper examines the global distribution of current accounts. Using a panel of more than 100 countries, the analysis establishes a set of stylized facts regarding the collective behavior of current accounts over the past four decades. In particular, we find that the global dispersion of current accounts has been steadily rising, which is qualitatively consistent with the view that ongoing financial globalization has allowed countries to maintain larger current account imbalances. However, this underlying trend is not quantitatively large enough to explain "global imbalances"—that is, the noticeable widening in external imbalances among major economies (for example, United States) seen in recent years.